Investing in Overseas Property Using Your SMSF

Having a holiday property in your mother’s hometown in the South of France or a rental apartment complex in Asia is a dream many people share. While it can be complicated to manage, an overseas property is a good asset to diversify your investment portfolio. It will also help boost your retirement fund, especially if you plan to lease the property for years. But the question is, is investing in an overseas property using your SMSF possible?

SMSFs investing in properties overseas is possible because both the ATO and SIS Act do not prohibit this type of property investment. Investing in a property abroad within your SMSF isn’t too different from purchasing a commercial building or any rental property in Australia. Still, you need to consider multiple factors before making this huge financial move.

Check the legislative requirements both abroad and in Australia.

Although an SMSF is not exclusive to Australia, other countries may not recognise it. Also, in some Asian and sub-continent countries, foreign investors can’t own property. You may need to find a resident, preferably a member of the SMSF, in the country to represent your fund. That way, the property title can be easily accommodated in the structure.

Make sure to check the trust deed.

When SMSF trustees consider any investment, it’s imperative to go over the trust deed again to check any issues. So do the same before investing in an overseas property using your SMSF

Generally speaking, the same strict regulations that apply to Australian property ownership also apply when buying another property overseas. For example, if you already own a residential property overseas, that can’t be transferred to your SMSF. But it’s usually acceptable to purchase commercial property within an SMSF. It doesn’t matter whether that apartment complex, warehouse or corporate building is in Australia or a country miles away.

Always check for other charges.

Title deeds generally differ from country to country. So the last thing you want is to purchase an international asset and find out the existing charges attached to the title. Be sure to study and explore how property titles are kept and taxed in other countries before closing the sale.

In addition, all SMSFs require annual auditing. Make sure to get all the information verified, so you can easily pass it on to your accountant and auditor. They will need to ensure every aspect of your foreign investment complies with Australian Superannuation laws. So, of course, this extra step may involve additional checks, administration and charges. You may also have to hire a local accountant to help with reporting.

Consider other legal compliance issues.

Australian SMSFs planning to purchase international property may need to set up a Limited Liability Company (LLC) in an overseas country and open a bank account in its name. After setting that up, the LLC can purchase the overseas property—then, your SMSF can invest in the shares of the LLC. That’s a suitable workaround for legal compliance issues you may face.

You may have to set up an LLC company before investing an overseas property using your SMSF.

Just make sure you study the overseas country’s tax rules. The LLC company you set up complies with tax requirements and other guidelines of the said country.

Find suitable property financing.

Financing an investment property using your SMSF in Australia often involves too many hoops, but it can be way more difficult when you do it internationally. Make sure to obtain solid pre-approval before engaging in any legally binding contract to purchase a foreign property.

Keep in mind that SMSFs are unique to Australia, and an overseas bank may be unlikely to understand the structure and approve loans for a foreign property purchase. So given the high risks and additional costs involved, it pays to do your research. That way, you can decide better whether investing internationally is the right strategy for your SMSF.

Final thoughts

Foreign properties, especially those located in France or other countries dear to you, can be attractive as assets. But like any other investment, you have to do due diligence and ensure you’ve explored all the considerations before purchasing an overseas property within your SMSF. 

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